CLUB / ASSOCIATION SERVICES- 2011 CHANGES

[Dr. Sanjiv Agarwal]

Finance Act 2011 has amended the definition of taxable services in sub clause (zzze) of section 65(105) by inserting the words ‘or any other person’ after the words, ‘to its members’.  The amended definition is as follows – 

“Any service provided or to be provided to its members or any other person  by any club or association in relation to provision of services, facilities or advantages for a subscription or any other amount”. 

Thus the scope of service has been expanded to include service provided to non-members as well . 

CBEC has clarified vide Letter No D.O.F. No 334/3/2011-TRU dated 28.2.2011 as under -

Services provided by a club or association to its members are already subjected to tax since 2005. When a member avails the facilities for his guest, he is already covered by the existing definition as the services are paid for by the member and not by the guest. However a number of clubs or associations allow non-members to use their facilities in their own capacity for a separate charge. Clubs also entertain members of other affiliated dated clubs. Such services are proposed to be brought within the revised definition. 

According to Finance Act 2011 amendment, clubs or associations providing services or facilities to the following shall be covered in the scope of taxable services –

a)      members

b)      guests of members

c)      non-members in their own capacity

d)      members of affiliated clubs or associations. 

Retrospective Amendment by Finance Act, 2011  

Finance Act 2011, has inserted a new section 96 J on the Finance Act 1994 providing for special exemption form service tax in certain cases.  Section 96J reads as under – 

“96J. (1) Notwithstanding anything contained in section 66, no service tax shall be levied or Special collected in respect of membership fee collected by a club or association formed for representing industry or commerce, during the period on and from the 16^th  day of June,. 2005 to the 31^st day of March, 2008 (both days inclusive). 

(2) Refund shall be made of all such service tax which has been collected but which would not have been so collected if sub-section (1) had been in force at all material times. 

(3) Notwithstanding anything contained in this Chapter, an application for the claim of refund of service tax shall be made within six months from the date on which the Finance Bill  2011 receives the assent of the President.”. 

Thus, under the existing provision of section 66 in respect of any service provided or to be provided to its members by any club or association in relation to provisions of services, facilities or advantages for a subscription or for any other amounts, service tax shall be chargeable. Section 96 J seeks to exempt retrospectively the associations formed for representing the industry or commerce from payment of service tax in respect of membership fee collected by such club or associations during the period from 16^th June, 2005 to 31^st March, 2008. Refund will be made of all service tax collected in respect of the exempt period. 

Assesses who have paid service tax for the relevant period ,i.e, 16.6.2005 to 31.3.2008 (both days inclusive) shall be entitled to refund for which assessee shall have to make a refund claim within six months from the date of presidential  assent to the Finance Bill 2011. It may be noted that the Finance Bill 2011 has received the President’s assent on 8^th April 2011.

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